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Will VeriSign Hold Domain Name Prices Steady this Year?

With significant bad publicity, a negative court decision, and a watchful eye in Washington, will VeriSign not invoke its full 7% .com price increase this year?

For the past two years, .com and .net registry VeriSign (NASDAQ: VRSN) has increased prices on .com domain names 7% and .net 10%, the maximum allowed under its contract with ICANN. The .com contract allows VeriSign (NASDAQ: VRSN) to increase .com fees 7% per year for four years of each six year term in its agreement. The assumption has always been that it would max out the increases during the first four years of the contract, which would result in the maximum financial benefit.

But that may change. So far this year VeriSign hasn’t announced a price increase, and it is required to give a six month notice of an increase. During VeriSign’s first quarter conference call, President and COO Mark McLaughlin said:

So far we’ve taken two of these increases. And the patentees’ have been thoughtful about the timing of the increases, and I think we should be continuing to do so particularly in life as the impact of an increase could have on sales in this weak economy, as well as some uncertainty in the multiple constituencies that are involved in this industry.

I think VeriSign is going to hold off on increasing prices until next year mainly for political reasons.

Raising prices this year will be politically insatiable. VeriSign may go through a tough antitrust battle thanks to an appeals court ruling last week. It doesn’t want to look greedy in the process.

It is also dealing with Washington this time around. VeriSign was on Capitol Hill last week, sitting right next to ICANN CEO Paul Twomey, testifying about the future of ICANN. The witnesses were asked about the transparency of VeriSign’s current contract. Twomey’s defensive experience as a witness was tough. I doubt VeriSign wants to sit in a special hearing about its price increases. They would be hard to justify.

Finally, Twomey is on his way out and a yet-to-be-determined replacement is on his or her way in. It makes sense to establish a good relationship with that CEO prior to announcing a price increase.

I don’t expect VeriSign to introduce a price increase of less than 7% this year as a solution. The contract seems to read that a 3% increase this year would strike out one of the 7% increases. In other words, VeriSign can’t make it up on the back end. Only if VeriSign calculated that the compounding of a smaller than 7% increase early on was better than a 7% increase later would it do it.

VeriSign’s stock is down about 8.5% this morning, no doubt partly due to the unfavorable court decision last week. To the extent that analysts have already baked in 7% increases in the first five years, the stock could come under more pressure.

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  1. EM @ KING.NET

    They are well known controlling a good profit in domain name, a perfect example is the pricing set for “premium” .tv domain names. Since this is working for them already, why not apply it to premium .com and .net when they expires. I will not be surprise to see this changes in the future. I hope other company beat them for the renewal of .com .net and even for .tv rights.

  2. Johnny

    VeriSign might also look at this as their last chance to get that fee hike if they believe they might get their monopoly rights revoked some time here soon.

  3. Domain Investor

    EM,
    You would be a sitting duck for a renewal increase for your domain – King.net .

    I’m sure they would want more than a $ 7. renewal fee.

    Maybe, that is why Rick S. sold a couple domains this year. Rick tends to be ahead of the curve.
    🙂

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